When I started investing I had no idea even where to begin. I read books and searched the internet, and found there simply was way too much information for a beginner to even get a grasp on. As you begin your investing journey, you will hear many conflicting views on what you should or should not do in regards to investing in stocks. After a few months of trying different investing methods and strategies; I discovered the best thing to do was keep it simple and follow the basic steps outlined below:
(1.) Never use money to buy stocks that you can NOT afford to lose. In other words, do not play a game of black-jack with your mortgage payment.
(2.) Never purchase a stock you receive through an online email or regular mail. It more than likely is a Pump-And-Dump Scam.
(3.) When you buy a stock always immediately put in a stop-loss order. This single step could protect you from complete financial ruin if you can not monitor your stocks daily.
(4.) Learn how to use trailing stops.
(5.) Avoid buying into a stock when the market first opens. This is because stock prices tend to be wild in the first hour and you may pay too much for a stock. Stocks tend to stabilize a bit after the first hour of trading. Trying to chase a stock going through during the first hour will frustrate you greatly.
(6.) If you are new to investing do NOT buy stocks on margin. You can use a margin account, but only use the actual cash you put into the account NOT what the broker is willing to lend you.
(7.) Control your own greed. If you start turning the stock market into a casino, it will take you for all your worth.
(8.) When you first start investing stay away from buying individual stocks until you learn how the stock market really works. Instead start with simple index funds or exchange traded funds. Investing in individual stocks takes a lot of knowledge and practice.
In my opinion, if a new investors sticks to these basic guidelines they will save them a lot of heads. I think many new investors become so overwhelmed with all the investment information available to them that they lose sight of the basics. If you keep your expectations and emotions in check then investing in the markets can be a fun and pleasant experience. However, if you let your greed and emotions take over your common sense; the stock market will become one of the most nerve racking experiences of your life.
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